Hong Kong money lender licence requirements and application explained

Hong Kong Money Lender Licence Requirements and Application

Money lending in Hong Kong is a regulated activity. Anyone carrying on a money lending business must hold a valid licence issued by the Licensing Court on the advice of the Commissioner of Police. Operating without a licence is a criminal offence under the Money Lenders Ordinance (Cap. 163).

Hong Kong Money Lender Licence

A money lender licence is the legal authorisation to lend money to the public in Hong Kong. The Licensing Court grants the licence, acting on recommendations from the Commissioner of Police. The Commissioner investigates each applicant to determine if they are a fit and proper person to hold a licence.

The licence is personal to the applicant. A company must apply in its own name. Each director and shareholder with significant control must satisfy the fit and proper test. The licence covers a single business premises; operate from more than one location and each premises requires a separate licence.

Hong Kong Money Lending Ordinance

The Money Lenders Ordinance (Cap. 163) governs money lending in Hong Kong. It establishes the licensing requirement, the application process, the interest rate cap, and the rules for record-keeping, advertising, and enforcement.

Section 5 makes it an offence to carry on business as a money lender without a licence. A person convicted of unlicensed money lending faces a maximum fine of HK$500,000 and imprisonment for two years.

Hong Kong Moneylender Registration

Registration is not a separate step. The application to the Licensing Court is the registration process. The court maintains a public register of licensed money lenders.

Submit the application on the prescribed form to the Registrar of the Licensing Court. The Commissioner of Police then conducts a background check on the applicant and any proposed responsible officers. The Commissioner may object to the grant of a licence on grounds including a criminal record involving dishonesty or violence, a finding that the applicant is not a fit and proper person, unsuitable business premises, or a false statement in the application.

Hong Kong Licensed Lender Requirements

To obtain and maintain a licence, a money lender must meet several requirements.

Fit and proper test. The Licensing Court must be satisfied that the applicant, and every director and substantial shareholder of a corporate applicant, is a fit and proper person. This involves a criminal record check and an assessment of financial probity.

Business premises. The licensed premises must be a physical location in Hong Kong. The Commissioner of Police inspects the premises to ensure they are suitable for money lending activities. A post office box or virtual office is not acceptable.

Annual licence fee. The licence is valid for one year. The annual licence fee is payable to the Licensing Court. Failure to pay the fee by the renewal date results in the licence lapsing.

Loan register. Every money lender must maintain a loan register containing details of each loan: the borrower's name, the loan amount, the interest rate, the repayment schedule and the date of each repayment. The register must be kept at the licensed premises and made available for inspection by the Commissioner of Police.

Money lender's records. Beyond the loan register, the money lender must keep copies of all loan agreements, receipts, correspondence and any security documents. Retain these records for at least six years after the loan is fully repaid.

Interest Rate Cap and Default Interest

The Money Lenders Ordinance imposes a strict interest rate cap. The total interest charged on a loan must not exceed 60 per cent per annum on the principal. This is an absolute limit. Any agreement that purports to charge interest above 60 per cent is unenforceable.

The 60 per cent limit applies to all charges expressed as interest, including fees, commissions and any other sums the lender requires the borrower to pay. The cap also applies to default interest. If a borrower defaults, the lender may charge default interest, but the total interest, including default interest, must not exceed 60 per cent per annum.

A loan agreement that charges interest exceeding 48 per cent per annum is presumed to be extortionate. The burden shifts to the lender to prove that the interest rate is not extortionate. The court may reopen the loan agreement and reduce the interest rate to a fair level.

Application Process

The application for a money lender licence involves six steps.

1. Prepare the application. Complete the prescribed application form. Include details of the applicant, the proposed business premises, and the responsible officers.
2. Submit to the Licensing Court. File the application with the Registrar of the Licensing Court. The court forwards the application to the Commissioner of Police for investigation.
3. Police investigation. The Commissioner of Police investigates the applicant's background, including criminal record, financial history and business reputation. The Commissioner may interview the applicant and inspect the proposed premises.
4. Objection or approval. If the Commissioner objects to the grant of the licence, the applicant may make representations to the Licensing Court. The court decides whether to grant the licence despite the objection.
5. Grant of licence. If the court is satisfied, it grants the licence. The licence is valid for one year from the date of grant.
6. Renewal application. Before the licence expires, the holder must submit a renewal application. The renewal process mirrors the initial application, including a fresh police investigation.

Advertisement Restrictions

Licensed money lenders must comply with strict rules on advertising. An advertisement must not mislead or deceive, omit material information, suggest that the lender is not subject to the Money Lenders Ordinance, or use words such as "bank" or "financial institution" unless the lender is authorised to do so.

All advertisements must include the lender's licence number. The Commissioner of Police may require a lender to withdraw any advertisement that breaches these rules.

Loan Documentation

Every loan must be documented in a money lending agreement. The agreement must state the loan amount, the interest rate expressed as an annual percentage rate, the repayment schedule, the total amount repayable, any security taken, and the borrower's right to repay early without penalty.

Give the borrower a copy of the agreement at the time the loan is made. The borrower has a cooling-off period of seven days during which they may cancel the loan without penalty.

Consequences of Non-Compliance

Operating without a licence is a criminal offence. A person convicted of unlicensed money lending faces a maximum fine of HK$500,000 and imprisonment for two years. Any loan agreement made by an unlicensed money lender is unenforceable. The borrower may recover any money paid under the agreement.

A licensed money lender who breaches the Ordinance may have their licence revoked by the Licensing Court. The court may also impose conditions on the licence or refuse to renew it.

Further Information

The Money Lenders Ordinance (Cap. 163) is available on the Hong Kong e-Legislation website. The Licensing Court publishes guidance notes and application forms on the Judiciary website. The Commissioner of Police also publishes information about the fit and proper test and the investigation process.

For guidance on whether your business requires a licence, refer to the resources on determining whether your activity is regulated. For information about other financial services licences, see the Securities and Futures Commission's website.